Monday, November 12, 2018

The Daily, Part 1, 11-12-18

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11/12/2018 Investment House Daily
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Investment House Daily Subscribers:


Targets hit: None issued
Entry alerts: CMG; LLY
Trailing stops: None issued
Stop alerts: NBEV

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- The pullback turns into a third day of selloff.
- DJ30 sells through support, NASDAQ and growth fare worse.
- China trade worries, dollar rally continues.
- Recent leaders start testing. Will they just test normally or sell as well?
- Bias turns negative as the daily bottom watching fades away.

A third day down from the Wednesday follow through, and this one had teeth, even seeing DJ30 and SP500 break sharply lower, SP500 even breaking the 200 day SMA.

NASDAQ, aided by AAPL's continued issues and the collateral damage to its suppliers (e.g. SWKS and QRVO, both downgraded by Citi today), undercut the gap higher from Halloween, trading into the gap zone formed after NASDAQ reversed on October 30. Looks as if NASDAQ may just have to visit that prior low once again.

Same with SOX as it dives lower, possibly the same with RUTX as it sold hard, closing at the session low and below the mid-October bounce point.

SP500 -54.79, -1.97%
NASDAQ -206.03, -2.78%
DJ30 -602.12, -2.32%
SP400 -1.61%
RUTX -1.98%
SOX -4.44%
NASDAQ 100 -2.98%

VOLUME: NYSE -8%, NASDAQ -5%. Trade remained below average and lower than Friday. Trade backed off the past week, but that was not great news as that included upside days as well as the recent downside. At least the lower trade suggests not absolute dumping of stocks.

ADVANCE/DECLINE: NYSE -2.8:1, NASDAQ -3.7:1. Steep but not horrid.

Okay, so the election didn't resolve any issues. Or did it? After the initial relief move on the split Congress, stocks have steadily faded, giving up that post-election move and more. The reversal move is still intact, but in tatters at the same time. If the election has had any impact at all outside the initial relief move, it is to the downside as prospects of more tax reform, etc. are out the window.

China trade issues returned as the WSJ reported the Administration is set to introduce a new Anti IP Theft Plan regarding China. Stocks did drop when this news was released pre-market. This is what the Administration stated a couple of weeks back when it said any trade negotiations with China must address IP theft and the so-called 'partnerships' China requires to conduct business behind the Great Wall. The great irony is, last week the market jumped on news Trump ordered his people to draft a trade deal with China, and it is very likely the very deal that today caused the market to hiccup. It all depends upon what side of the fence you are looking over.

Dollar: The dollar continues to surge against the euro and most other currencies. This is hampering oil, and indeed oil's decline is almost day by day equal to the dollar's rise. Today, oil jumped initially on news the Saudis said with demand lower output should be lower. Oil finished lower nonetheless, as the dollar rose . . . and the President stated oil output should not be reduced as lower oil prices are desired.

Leadership: Not much was up today, but what was up was, no surprise, defensive. Utilities (e.g. AEP), personal products (KMB, PG) played at the top of the leaderboard.

Recent leaders in retail (WMT, DG), drugs (PFE, though JNJ and LLY were higher), food (MCD, MKC, PEP) took a day off. After good runs that is not necessarily bad, but in this market leaders can quickly turn. Thus far, still holding the uptrends.



DJ30: The Dow sold hard, falling back through the 50 day MA's and filling the Wednesday upside gap. Not a great response to the breakout move -- rejection that is. Volume was up, back above average on the selling after two days below on the first part of the test. No longer really a test.

SP500: Broke back down through the 200 day SMA, filling the Wednesday gap higher and more. At least volume fell back below average, showing fewer sellers and an utter lack of bids. Perhaps it holds at the earl October low (2710) from the first selloff and forms a right shoulder. Perhaps, but with this sharp reversal in price it will have to show it can do that.

NASDAQ: Gapped lower, sold below the recent lows from the consolidation. Starting to fill the gap from two weeks back having filled the last one. Though volume was lower the bias is clearly downside. About all the upside can look for near term is a hold here to form a better right shoulder.

RUTX: Sold to midmorning, recovered some ground just before the last hour, rolled over to close at the session low. Same setup as NASDAQ, same iffy outcomes near term.

SP400: The midcaps sold also, closing at the early October interim low. If it is going to form an inverted head and shoulders this is where it needs to do so. Not holding our breath.

SOX: Gapped lower from an interesting Friday close at the early October interim low. So much for that interesting close. SOX gapped sold hard to fill the gap upside on Halloween.


Recent leadership lost a bit of ground, but after more than a week of upside, not entirely unexpected.

Retail: WMT, TGT, COST, ROST, DG all took a break from good moves.

Drugs: LLY surged higher, continuing its upside break, but it lost momentum in the afternoon as all the market faded. JNJ managed a modest gain but showing a doji on higher trade. RGEN gapped to the 10 day EMA on light trade; okay, may be interesting. ILMN looked good but gapped downside hard Monday.

Food: Good run, started to fade just modestly. KR tried higher for a fourth session, faded. MCD faded off its run but on low trade. MKC faded some as well, PEP showed a doji, ready to test. KO added some more upside.

Software: Not great action. MSFT broke below the 50 day EMA. DATA continued to sell, showing a doji at the 50 day SMA on the low; not bad. VMW not bad, CRM bad. FFIV selling to the 50 day EMA, not terrible. ADBE dropped below the 200 day SMA. Some possible, but not great.

SCAANN: SQ testing toward the 200 day, rebounding. CRM broke lower. AAPL dives to the 200 day SMA on the close. AMZN broke the 200 day SMA on rising trade. NFLX, NVDA both sold off.

FB sold to the September low. GOOG sold lower for a third day.

Telecom: VZ gapped up to a doji; still upside though. VRSN sold to the 50 day SMA. HLIT still held up in its test. Decent overall.

Financial: V disappointed, selling below the 50 day MA's. Will see if it can hold this support where it closed. JPM broke lower from the 200 day SMA. GS imploded to a lower low. BAC breaking lower form a 50 day EMA test.


Stats: -602.12 points (-2.32%) to close at 25387.18

Stats: -206.03 points (-2.78%) to close at 7200.87
Volume: 2.3B (-4.96%)

Up Volume: 396.25M (-166.72M)
Down Volume: 1.89B (+60M)

A/D and Hi/Lo: Decliners led 3.65 to 1
Previous Session: Decliners led 2.95 to 1

New Highs: 30 (-13)
New Lows: 176 (+49)

Stats: -54.79 points (-1.97%) to close at 2726.22
NYSE Volume: 853.836M (-8.37%)

Up Volume: 144.558M (-132.054M)
Down Volume: 702.562M (+65.996M)

A/D and Hi/Lo: Decliners led 2.76 to 1
Previous Session: Decliners led 2.09 to 1

New Highs: 59 (-1)
New Lows: 131 (+22)


VIX: 20.45; +3.09
VXN: 28.11; +3.84
VXO: 21.00; +2.91

Put/Call Ratio (CBOE): 1.19; +0.08

Bulls and Bears:

Bulls are on an impressive dive from the low sixties to the low forties. Straight down. Bears are up but held steady on the week. Bulls are willing to converge, bears are not there yet. Stocks selling after bulls in the sixties is normal. They have bounced from here before, but in 2015 and again in 2016 they fell to the mid-twenties, crossing over with bears.

This now gets at least interesting. Bulls tumbled 6.2 points, now well below 50. Perhaps that is the dam breaking and negative sentiment will ramp. It is noteworthy that the market rebounded in the aftermath. Bears mad a significant move, at least for the bears.

Bulls: 42.5 versus 44.3

Bears: 19.8 versus 19.8

Theory: When everyone is bullish and has put all their capital to work, where does the ammunition to drive the market come from? There is always new money to start a new year. After that is used will more money be coming? That is the question.

Bulls: 42.5 versus 44.3
50.5 versus 51.9 versus 56.3 versus 61.8 versus 60.6 versus 59.0 versus 57.7 versus 60.1 versus 59.6 versus 57.7 versus 57.3 versus 54.9 versus 54.5 versus 54.9 versus 55.3 versus 52.4 versus 47.1 versus 47.6 versus 52.0 versus 55.5 versus 52.9 versus 50.0 versus 49.1 versus 46.6 versus 43.1 versus 43.6 versus 48.0 versus 43.6 versus 42.2 versus 49.5 versus 55.5 versus 54.9 versus 48.6 versus 48.1 versus 48.5 versus 41.9 versus 54.4 versus 66.00

Bears: 19.8 versus 19.8
19.8 versus 19.0 versus 18.3 versus 18.5 versus 18.6 versus 18.3 versus 18.1 versus 18.3 versus 18.1 versus 18.3 versus 18.3 versus 18.6 versus 18.8 versus 18.6 versus 18.5 versus 18.5 versus 18.6 versus 18.4 versus 17.6 versus 17.8 versus 17.7 versus 19.2 versus 19.2 versus 19.4 versus 19.4 versus 20.6 versus 20.8 versus 19.6 versus 19.8 versus 18.6 versus 17.5 versus 16.8 versus 15.7 versus 15.5 versus 14.4 versus 14.6 versus 14.4 versus 15.5 versus 12.6 versus 12.8 versus 12.7 versus 13.5 versus 15.2 versus 15.1 versus 15.2 versus 15.1 versus 15.1 versus 15.4 versus 15.4 versus 14.4 versus 14.4 versus 15.1 versus 15.2 versus 15.1 versus 17.0 versus 17.1 versus 19.0 versus 20.2


Bonds: 3.186%. Bond market closed for Veteran's Day.

Historical: the last sub-2% rate was in November 2016 (1.867%). 3.186% versus 3.239% versus 3.228% versus 3.222% versus 3.201% versus 3.22% versus 3.146% versus 3.149% versus 3.119% versus 3.089% versus 3.079% versus 3.126% versus 3.111% versus 3.1692% versus 3.20% versus 3.196% versus 3.1779% versus 3.209% versus 3.165% versus 3.158% versus 3.167% versus 3.146% versus 3.169 versus 3.206% versus 3.233% versus 3.189% versus 3.183% versus 3.061% versus 3.087% versus 3.061% versus 3.052% versus 3.048% versus 3.048% versus 3.085% versus 3.066% versus 3.068% versus 3.076% versus 3.057% versus 2.99% versus 3.00% versus 2.972% versus 2.963% versus 2.977% versus 2.937%

EUR/USD: 1.12348 versus 1.13475. Sharp break lower below the August low. So much for the euro trying to bottom at that August low.

Historical: 1.13475 versus 1.1364 versus 1.14329 versus 1.14228 versus 1.14090 versus 1.13881 versus 1.14019 versus 1.13394 versus 1.13455 versus 1.13760 versus 1.14042 versus 1.13757 versus 1.3972 versus 1.14682 versus 1.14626 versus 1.1538 versus 1.14556 versus 1.14961 versus 1.1578 versus 1.15906 versus 1.15592 versus 1.15901 versus 1.15324 versus 1.4966 versus 1.4916 versus 1.1598 versus 1.15164 versus 1.14762 versus 1.15517 versus 1.15774 versus 1.16038 versus 1.16357 versus 1.17501 versus 1.17658 versus 1.17476 versus 1.17486 versus 1.17772 vs 1.16833 versus 1.16692 versus 1.16858 versus 1.16226 versus 1.16900 versus 1.15863 versus 1.16016 versus 1.15946 versus 1.15534 versus 1.16243 versus 1.16341 versus 1.15832 versus 1.16029 versus 1.1664 versus 1.17035 versus 1.1691 versus 1.16802 versus 1.16216 versus 1.15390 versus 1.15709 versus 1.158 versus 1.1487

USD/JPY: 113.717 versus 113.91. Rallied to the October high, stalled for now.

Historical: Last below 109 in June 2018: 113.723 versus 113.72 versus 113.641 versus 113.419 versus 113.244 versus 113.204 versus 112.81 versus 112.877 versus 112.876 versus 112.58 versus 111.89 versus 112.391 versus 112.091 versus 112.427 versus 112.680 versus 112.527 versus 112.385 versus 112.553 versus 112.558 versus 111.848 versus 112.222 versus 112.076 versus 112.158 versus 113.01 versus 113.12 versus 113.706 versus 113.894 versus 114.383 versus 113.642 versus 113.690 versus 112.734 versus 112.981 versus 112.811 versus 112.575 versus 112.448 versus 112.247 versus 112.369 versus 111.849 versus 112.06 versus 111.81 versus 111.491 versus 111.608 versus 111.192 versus 111.064 versus 110.680

Oil: 59.93, -0.26. Tried higher, faded, holding the February low, November high. Okay, will see if it tries to bounce.

Gold: 1203.50, -5.10. Sold farther near the 1200 support.


This market shows an impressive ability to not hold upside moves outside of a few sectors. Of course, after their moves higher they are going to have to show if they can hold their moves as well with just modest tests. These tests will be an important indication of the market, i.e. if anything can hold up or if everything starts to sell off, an indication of a bear market.

Thus far at least defensive areas are holding up. High praise indeed for the market.

That said, we are playing some of those, e.g. AEP as well as some drugs, retail, telecom. The list narrows. There are still some techs with upside setups, but the odds they make the upside moves are colored by the overall group weakness, and any upside breaks are suspect given their treatment.

Other groups are interesting still on tests, e.g. DG. HUM is of interest.

After three days lower it could be time for a bounce just as some stocks start to roll back over, e.g. AMZN, though AMZN broke support on a jump in volume. Bottoms tend to form early in the week, and often there is a sharp drop that reverses. Have to watch for that even if no one else is.

Notice that? Not everyone is calling for a bottom each and every session. Indeed, the consensus is now the selling continues. That is an interesting if not dramatic change. VIX started upside Monday off the 200 day SMA; as noted last week, it was at a point to bounce and the selling continued and it actually got some legs. Still well off its recent highs that were themselves well off the early 2018 highs.

Even with the cessation, almost, of the daily bottom watch, it is worth looking at some downside to see if we can get good entries. NVDA was a pain this morning, selling off hard and fast at the open and not coming back. Perhaps LMT or AMZN or BAC will continue to roll over.

Have a great evening!

End part 1
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